Dissolve a Non-profit

Concluding the affairs of an organization can be a complex and emotionally charged undertaking. Nevertheless, implementing strategic steps can facilitate a smoother dissolution of your nonprofit.

Various factors may lead to this decision, such as the fulfillment of the organization’s mission, insurmountable challenges to sustainability, or a merger with another nonprofit necessitating dissolution. Whether prompted by mission achievement, sustainability concerns, or a strategic merger, the steps delineated below aim to guide and streamline the process of winding down your nonprofit with careful planning.

1. Board Resolution for Dissolution:

• Begin by convening a meeting of the nonprofit’s board of directors. At this meeting, propose and pass a resolution for dissolution. The resolution should be recorded in the meeting minutes, specifying the decision and the vote.

2. Notify State Authorities:

• Contact the state agency responsible for overseeing nonprofits, typically the Secretary of State’s office. Inquire about the specific requirements and forms for initiating the dissolution process. File the necessary paperwork, which may include Articles of Dissolution or a similar document.

3. Settle Debts and Obligations:

• Undertake a thorough review of the nonprofit’s financial affairs. Settle outstanding debts, pay creditors, and address any contractual obligations. Distribute remaining assets to other nonprofit organizations as specified in the organization’s bylaws.

4. Notify Creditors and Donors:

• Issue formal notifications to creditors and donors, informing them of the nonprofit’s intent to dissolve. Establish a clear process for submitting final invoices or claims, and communicate the timeline for concluding financial matters.

5. File Articles of Dissolution:

• In this type of dissolution, the IRS mandates that the board of directors of the nonprofit organization complete certain requirements to “dissolve,” or shut down, the 501(c)(3). If your are terminating your organization or going out of business by merging with another organization, you need to file a final form by the 15th day of the fifth month after the end of the period for which your tax return is due.

6. File IRS Form 990:

• File the final IRS Form 990 with the Internal Revenue Service (IRS). Ensure that all tax filings are up to date and in compliance with federal regulations. Obtain confirmation from the IRS that the nonprofit’s tax-exempt status has been officially revoked.

7. Employee and Vendor Notifications:

• Notify employees and vendors of the impending dissolution. Comply with employment laws by addressing final paychecks, benefits, and any required notifications. Inform vendors about the dissolution and settle any outstanding financial obligations.

8. Asset Distribution and Restrictions:

• Follow the nonprofit’s bylaws and state laws regarding the distribution of remaining assets. If there are any restrictions on the use of assets, ensure compliance with these limitations. Document the entire asset distribution process.

9. Final Reports and Records:

• Prepare and file any final reports required by the state or federal authorities. Keep detailed records of the dissolution process, including meeting minutes, financial transactions, and correspondence. Retain these records for the legally mandated timeframe.